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With Celgene Deal, Jounce Lands $261M And a “Trusting Partner”

It’s getting harder and harder to stand out in the increasingly crowded cancer immunotherapy field. But with a wide-ranging alliance being announced this morning, three-year-old Jounce Therapeutics has been able to make its mark.

The Cambridge, MA-based company has inked a deal to work with Summit, NJ-based Celgene (NASDAQ: CELG) on a group of experimental drugs—among them lead candidate JTX-2011—meant to spur on the immune system to fight cancer. And the payout is big: Celgene is paying Jounce $225 million in cash upfront, and making a $36 million equity investment in the Cambridge company to boot, even though none of these drugs have begun clinical testing in humans as of yet.

Jounce is also eligible to receive another $2.3 billion in downstream payments, as well as royalties, depending on how its drugs progress.

The deal—Jounce’s first partnership since it was formed by Third Rock Ventures in 2013—is a measure of validation for a a young company operating in a competitive space. It also aligns Jounce with a collaborator known for trusting its smaller partners as they develop their drugs, according to CEO Richard Murray. Specifically noting the success that Agios Pharmaceuticals (NASDAQ: AGIO) found by forming deep ties with Celgene, Murray says that the investment will be key in pushing forward Jounce’s clinical programs.

“That kind of history of partnership really made the case for Celgene,” Murray said in a telephone interview.

Companies across the globe have been trying to edge their way into immuno-oncology, and Celgene is no exception. Celgene doesn’t have an approved “checkpoint inhibitor” like Bristol-Myers Squibb or Merck, a type of immunotherapy drug that has started to change the way certain cancers are treated. But Celgene has been using deals to amass an array of immunotherapy drugs nonetheless.

The company has formed partnerships with Bluebird Bio (NASDASQ: BLUE) and Juno Therapeutics (NASDAQ: JUNO) on a cellular immunotherapy method known as “CAR-T,” is co-developing an checkpoint inhibitor with AstraZeneca, and started working with Agios on some additional immuno-oncology drugs earlier this year as well. Now the Jounce deal has been added to the mix.

Jounce is developing both drugs and diagnostics for cancer. The company has been developing drugs meant to either work with checkpoint inhibitors—which, despite their success, still only work in a fraction of patients—or to treat cancers for which checkpoint drugs aren’t effective. Its lead candidate, JTX-2011, for instance, targets what’s known as inducible T cell co-stimulator, or ICOS, a protein found on the surface of a specific type of T cell that only gets expressed in large quantities when the immune system is activated.

“That is a step on the gas of the immune system,” Murray says of targeting ICOS.

Jounce hasn’t disclosed any specific drug candidates beyond JTX-2011, but Murray has said previously that the company aims to find ways to draw out some of the other members of the immune system to fight cancer, like macrophages. Jounce is also developing diagnostics that could help it identify which patients might best respond to its treatments.

“We haven’t been very public about the programs behind JTX-2011, but clearly the partnering discussions went into that in great detail,” Murray says.

Jounce believes that JTX-2011 may be particularly useful for patients with cancers of the lung, head, or neck. The first tests are coming later this year, when Jounce should begin the first early-stage trials of JTX-2011. Jounce will test it drug both as a monotherapy and in tandem with a checkpoint inhibitor, Murray says.

In the Celgene deal, Jounce will keep a portion of the U.S. rights to each drug candidate, though it will retain the most potential upside from JTX-2011. Should the drug ever make it to market, Jounce gets 60 percent of the U.S. profits, compared to 25 percent of the U.S. sales from the next program in the deal—a drug candidate has yet to be publicly disclosed.

Jounce and Celgene will equally split U.S. profits to up to three other programs as well. For all of these drugs, Celgene gets all non-U.S. rights, with Jounce entitled to royalties.

David Holley is Xconomy's national correspondent based in Austin, TX. You can reach him at dholley@xconomy.com Follow @xconholley